Dean Curnutt, Columnist

Low Volatility Is Market's Most Significant Danger

The excess amount of capital chasing opportunity is resulting in more, not less, risk.

May 26, 2017 at 9:00 AM UTC

Dean Curnutt is the CEO of Macro Risk Advisors, a firm that provides global market risk analysis and execution for institutional investors. He was formerly managing director and head of equity sales-trading at Banc of America Securities.

Brace yourself.
Photographer: Daniel Berehulak/Getty Images

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A terrorist attack at a concert in the U.K. killed more than 20 people and injured many more. North Korea continues its provocative ballistic missile tests. A huge cyber-attack affected 200,000 computers in more than 100 countries. The U.S. president fired the FBI director, leading to questions about whether he obstructed justice and even raising the specter of impeachment.

In normal times, one would expect these turbulent events to be reflected in volatility in asset prices. But these times -- when financial market outcomes are being suppressed by overriding forces of monetary policy, money flows and investor expectations -- are not normal. There is a particular risk that investors construe the substantially low readings of volatility as signs that market conditions are benign, when, in fact, they are not.